NEW YORK, Oct. 31, 2019 /PRNewswire/ -- SiriusXM today announced third quarter 2019 operating and financial results. Total revenue of $2.0 billion increased 37% compared to the prior year period, boosted by the acquisition of Pandora Media on February 1, 2019. On a pro forma basis, revenue climbed 7% from $1.9 billion in the third quarter of 2018. The Company's net income totaled $246 million in the third quarter, compared to $343 million in the prior year period. Net income per diluted common share was $0.05 and $0.07 in the third quarter and the prior year period, respectively.

The decline in net income was primarily driven by refinancing expenses associated with SiriusXM's July redemption of its 6.00% senior notes due 2024, in addition to non-recurring tax benefits in the prior year period. The Company's effective tax rate for the third quarter 2019 was 22.2%, compared to 3.3% in the prior year period.

Adjusted EBITDA grew 12% to $657 million in the third quarter and resulted in an adjusted EBITDA margin of 32.6%, growing approximately 160 basis points from 31.0% in the third quarter 2018. The adjusted EBITDA margin in the quarter was driven primarily by revenue growth across the business and cost efficiencies in subscriber acquisition costs and revenue share and royalties.

"SiriusXM's robust third quarter saw strong results across the board. Total net additions benefited from continuing strength in the auto sector, and our adjusted EBITDA hit an all-time quarterly record of $657 million. Things have never been more exciting at the company as we continue to invest in our brands, content, products and expanded OEM distribution. With two months left in the year, we are raising 2019 guidance for revenue, adjusted EBITDA and free cash flow and we are confident in our expectations for self-pay subscriber growth," said Jim Meyer, Chief Executive Officer, SiriusXM.

"We officially opened our new Hollywood studio complex with a special series of shows by Howard Stern. Howard is at the top of his game and was welcomed to LA by an array of stars and special live performances by Adam Levine and Green Day, all from our state-of-the-art street level performance space we call The Garage. Howard's broadcast followed a month of special shows, interviews, and performances in LA exclusively for us by Carrie Underwood, Julia Roberts, Dave Matthews and breakout artist Billie Eilish, to name a few. Re-establishing ourselves in the Entertainment Capital of the world, and being closer to compelling talent and brands, bolsters the value of our programming for our subscribers," added Meyer.

Pro forma figures assume the Pandora acquisition closed on January 1, 2018.

THIRD QUARTER 2019 HIGHLIGHTS

SiriusXM operates two complementary audio entertainment businesses — our SiriusXM business and our Pandora business. Further information regarding these two segments will be contained in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2019. The pro forma financial and operating highlights of these two segments are presented separately below and exclude the impact of share-based payment expense.

SIRIUSXM

• Self-Pay Subscribers Top 29.6 Million. SiriusXM added 302,000 net new self-pay subscribers in the third quarter to end with more than 29.6 million self-pay subscribers. Total net subscriber additions in the third quarter were 210,000, resulting in more than 34.6 million total SiriusXM subscribers at the end of the period. Paid promotional subscribers decreased due to declines in shipments from automakers offering paid promotional subscriptions. Self-pay monthly churn for the quarter was 1.7%, compared to 1.8% in the third quarter of 2018.
• SiriusXM Revenue of Nearly $1.6 Billion. Third quarter revenue of $1.6 billion grew 7% compared to the prior year period. This growth was driven by a 3% increase in total SiriusXM subscribers and 3% growth in SiriusXM's average revenue per user (ARPU) to $13.90.
• Gross Profit Grows 7%. Total cost of services at SiriusXM increased 6% to $596 million in the third quarter, driven primarily by higher revenue share and royalties and programming and content expenses. Gross profit at SiriusXM in the quarter totaled $970 million, increasing 7% over the third quarter of 2018, and produced a gross margin of 62%, flat compared to the prior year period.
• Marvel to Create Original Podcasts for SiriusXM and Pandora. SiriusXM and Marvel recently announced a multi-year agreement under which Marvel will create a substantial number of exclusive podcasts for SiriusXM and Pandora. In Marvel's most sweeping podcast deal ever, the venture will include both scripted and unscripted series, themed live events, and much more, premiering in 2020. SiriusXM and Pandora will also debut many of Marvel's most popular podcasts before they can be heard anywhere else.

PANDORA

• Advertising Revenue Hits All-Time High. Ad revenue at Pandora reached a record $315 million, growing 8% over the third quarter of 2018. Ad revenue was driven by strong third quarter monetization of $85 per thousand hours, growing 10% over the third quarter 2018. Strength in traditional audio advertising, boosted by video programmatic and engagement-based video, as well as the expansion of off-platform efforts and fees generated on the AdsWizz platform drove revenue growth. Total revenue for Pandora grew 7% to $447 million in the quarter, aided in part by a 5% increase in subscriber revenue to $132 million.
• Total Ad Supported Listener Hours of 3.32 Billion. Monthly Active Users (MAUs) at Pandora were 63.1 million at the end of the third quarter, down from 68.8 million in the prior year period. Total ad supported listener hours were 3.32 billion in the period, down from 3.59 billion in the third quarter of 2018.
• Self-Pay Net Adds of 33,000. Pandora added 33,000 net new self-pay subscribers in the third quarter to end with nearly 6.3 million self-pay subscribers. In the third quarter, a one-year paid promotional subscription trial with T-Mobile ended, resulting in approximately 700,000 paid promotional trials being retired. This brought total Pandora subscribers to over 6.3 million at the end of the period, which included a paid promotional subscriber base of 45,000.
• Gross Profit Grows 19%. Total cost of services at Pandora in the third quarter 2019 of $278 million increased 1% compared with the third quarter 2018. This resulted in gross profit at Pandora of $169 million, up 19% over the third quarter 2018, and produced a gross margin in the quarter of 38%, growing approximately 400 basis points from 34% in the prior year period. This expansion was driven primarily by lower revenue share and royalties and customer service and billing expenses as a percentage of revenue.

"SiriusXM's strong year for capital returns continued in the third quarter, with $464 million of common stock repurchased in the quarter. Total capital returned to stockholders, including dividends, is over $2.1 billion year-to-date through the third quarter — our largest first nine months for capital returns ever. At quarter-end, our debt to adjusted EBITDA ratio was 3.25 times and we had nearly $1.7 billion available on our revolving credit facility. This gives us ample liquidity to continue investing in our business while returning capital to stockholders," noted David Frear, Chief Financial Officer, SiriusXM.

2019 GUIDANCE

The Company is increasing its guidance for pro forma revenue, adjusted EBITDA and free cash flow and reiterating existing full-year 2019 guidance for SiriusXM self-pay net subscriber additions. The company's increased full-year guidance for the combined company, including Pandora, is as follows:

• SiriusXM self-pay net subscriber additions approaching 1 million,
• Pro forma revenue of approximately $7.85 billion,
• Adjusted EBITDA approaching $2.4 billion, and
• Free cash flow of approximately $1.625 billion.

STOCKHOLDER NOTICE

We recently reached an agreement to settle a stockholder derivative lawsuit. As part of the settlement approval process, the court has directed us to provide the following link to the settlement notice and related information on the Investor Relations section of our website: http://investor.siriusxm.com/investor-overview/#notice. Stockholders have the right to object to the settlement, and the deadline to do so is January 2, 2020.

CAPITAL RETURN PROGRAM

Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act of 1934, as amended, in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates, or otherwise. The Company expects to fund the repurchases through a combination of cash on hand, cash generated by operations and future borrowings. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.

The Company's dividend policy may change at any time without notice to stockholders. The declaration and payment of dividends is at the discretion of the Company's Board of Directors in accordance with applicable law after taking into account various factors, including the Company's financial condition, operating results, current and anticipated cash needs, limitations imposed by its indebtedness, legal requirements and other factors that the Board of Directors deems relevant.

THIRD QUARTER 2019 RESULTS

 

 

 

 

Unaudited Pro Forma Results

Set forth below are our pro forma results of operations for the three and nine months ended September 30, 2019 compared with the three and nine months ended September 30, 2018.  These pro forma results are based on estimates and assumptions, which we believe are reasonable.  They are not the results that would have been realized had the Pandora Acquisition actually occurred on January 1, 2018 and are not indicative of our consolidated results of operations in future periods.  The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs, fair value gain or loss on the Pandora investment and associated tax impacts.  Please refer to the Footnotes to Results of Operations.

Footnotes to Pro Forma Results of Operations

The following tables reconcile our results of operations as reported to our pro forma results of operations for the three and nine months ended September 30, 2019 and 2018 which includes the Pandora pre-acquisition financial information for the applicable periods and the effects of purchase price accounting.  These pro forma results are based on estimates and assumptions, which we believe are reasonable.  They are not the results that would have been realized had the Pandora Acquisition actually occurred on January 1, 2018 and are not indicative of our consolidated results of operations in future periods.  The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs, fair value gain or loss on the Pandora investment and associated tax impacts.

 

 

 

 

 

Key Financial and Operating Performance Metrics

Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in Sirius XM's subscriber count or subscriber-based operating metrics.

Set forth below are our subscriber balances as of September 30, 2019 compared to September 30, 2018:

The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the three and nine months ended September 30, 2019 and 2018:

Glossary

Monthly active users - the number of distinct registered users on the Pandora services, including subscribers, that have consumed content within the trailing 30 days to the end of the final calendar month of the period. The number of monthly active users on the Pandora services may overstate the number of unique individuals who actively use our Pandora service, as one individual may use multiple accounts. To become a registered user on the Pandora services, a person must sign-up using an email address or phone number, or access our service using a device with a unique identifier, which we use to create an account for our service.

Average self-pay monthly churn - the Sirius XM monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization.  We adjust EBITDA to exclude the impact of other expense (income) as well as certain other charges discussed below.  Adjusted EBITDA is a Non-GAAP financial measure that excludes or adjusts for (if applicable): (i) certain adjustments as a result of the purchase price accounting for the XM Merger and the Pandora Acquisition, (ii) predecessor net income adjusted for certain expenses, including depreciation and amortization, other income (loss), and share-based payment expense for January 2019 and the nine months ended September 30, 2018, (iii) share-based payment expense and (iv) other significant operating expense (income) that do not relate to the on-going performance of our business.  We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our capital structure and purchase price accounting.  We believe investors find this Non-GAAP financial measure useful when analyzing our past operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies.  We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions.  As a result of large capital investments in our satellite radio system, our results of operations reflect significant charges for depreciation expense.  We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business.  We also believe the exclusion of the legal settlements and reserves, acquisition related costs, loss on extinguishment of debt and loss on disposal of assets, to the extent they occur during the period, is useful as they are significant expenses not incurred as part of our normal operations for the period.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the XM Merger and the Pandora Acquisition.  We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our unaudited consolidated statements of comprehensive income.  Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP.  The reconciliation of net income to the adjusted EBITDA is calculated as follows:   

 

Free cash flow - is derived from cash flow provided by operating activities, net of additions to property and equipment and purchases of other investments.  Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity.  In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders.  We exclude from free cash flow certain items that do not relate to the on-going performance of our business, such as cash flows for acquisitions, strategic and short-term investments, and net loan activity with related parties and other equity investees.  We believe free cash flow is an indicator of the long-term financial stability of our business. Free cash flow, which is reconciled to "Net cash provided by operating activities," is a Non-GAAP financial measure. This measure can be calculated by deducting amounts under the captions "Additions to property and equipment" and deducting or adding Restricted and other investment activity from "Net cash provided by operating activities" from the unaudited consolidated statements of cash flows.  Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies. Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities.  We believe free cash flow provides useful supplemental information to investors regarding our current cash flow, along with other GAAP measures (such as cash flows from operating and investing activities), to determine our financial condition, and to compare our operating performance to other communications, entertainment and media companies.  Free cash flow is calculated as follows:

ARPU - Sirius XM ARPU is derived from total earned subscriber revenue (excluding revenue associated with our connected vehicle services), advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period.  Pandora ARPU is defined as average monthly subscriber revenue per paid subscriber on our Pandora subscription services. 

Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period.  SAC, per installation, is calculated as follows:

Ad supported listener hours - is based on the total bytes served over our advertising supported platforms for each track that is requested and served from our Pandora servers, as measured by our internal analytics systems, whether or not a listener listens to the entire track. For non-music content such as podcasts, episodes are divided into approximately track-length parts, which are treated as tracks. To the extent that third-party measurements of advertising hours are not calculated using a similar server-based approach, the third-party measurements may differ from our measurements.

RPM - is calculated by dividing advertising revenue, excluding AdsWizz and other off-platform revenue, by the number of thousands of listener hours on our Pandora advertising-based service.

LPM - is calculated by dividing advertising licensing costs by the number of thousands of listener hours on our Pandora advertising-based service.

LPU - is calculated by dividing subscriber licensing costs by the number of paid subscribers on our Pandora subscription services.

About SiriusXM

Sirius XM Holdings Inc. (NASDAQ: SIRI) is the world's largest audio entertainment company, and the premier programmer and platform for subscription- and advertising-supported audio products. With the recent addition of Pandora, the largest streaming music provider in the U.S., SiriusXM reaches more than 100 million people with its audio products. For more about the new SiriusXM, please go to: www.siriusxm.com.

FORWARD-LOOKING STATEMENTS

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "outlook" or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: our substantial competition, which is likely to increase over time; our ability to attract or increase the number of subscribers, which is uncertain; our ability to profitably attract and retain more price-sensitive consumers; failure to protect the security of personal information about our customers; interference to our service from wireless operations; a decline in the effectiveness of our extensive marketing efforts; consumer protection laws and their enforcement; our failure to realize benefits of acquisitions or other strategic initiatives, including the acquisition of Pandora Media, Inc.; unfavorable outcomes of pending or future litigation; the market for music rights, which is changing and subject to uncertainties; our dependence upon the auto industry; general economic conditions; existing or future government laws and regulations could harm our business; failure of our satellites would significantly damage our business; the interruption or failure of our information technology and communications systems; rapid technological and industry changes; failure of third parties to perform; our failure to comply with FCC requirements; modifications to our business plan; our indebtedness; damage to our studios, networks or other three facilities as a result of terrorism or natural catastrophes; our principal stockholder has significant influence over our affairs and over actions requiring stockholder approval and its interests may differ from interests of other holders of our common stock; impairment of our business by third-party intellectual property rights; and changes to our dividend policies which could occur at any time. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, in each case, as filed with the Securities and Exchange Commission (the "SEC") and available at the SEC's Internet site (http://www.sec.gov). The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.

Source: SiriusXM

Contact for SiriusXM:

Hooper Stevens
212-901-6718
Hooper.stevens@siriusxm.com

Patrick Reilly
212-901-6646
patrick.reilly@siriusxm.com

 

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SOURCE Sirius XM Holdings Inc.